Hasslehoff Inc., is a multinational company with divisions around the world.Division A in the United States purchases a part from Division G in Canada.There is no outside market for the part.The part is sold for $12 and normally receives a 20% markup on cost. What is the transfer price using the resale price method?
A) $10
B) $9.60
C) $12
D) $14.40

Question

Quizplus · Accepted Answer

The resale price method calculates the transfer price by subtracting the markup from the selling price. The part is sold for $12 with a 20% markup on cost. Therefore, the cost is $12 / 1.20 = $10.